These
appeals are preferred by the assessee against the judgment of the Gujarat High
Court answering the two questions referred to it, at the instance of the
Revenue, in favour of the Revenue and against the assessee. The two questions
stated for the opinion of the High Court under Section 256(1) are:

"(1)
Whether on the facts and in the circumstances of the case, the assessee was
entitled to claim deduction from tax in respect of deoiled cakes exported or
sold to exporters by it under section 2(5)(a)(ii) and (iii) and Section 2(5)(c)
of the Finance Act, 1966 read with item No. 28 of the First Schedule to the
Industries (Development and Regulation) Act, 1951 for the assessment year 1966-
67? (2) Whether on the facts and in the circumstances of the case the assessee
was entitled to claim deduction from income-tax in respect of deoiled cakes
exported or sold to exporters by it under section 2(4)(a)(ii) and (iii) and
section 2(4)(c) of the Finance Act, 1967 read with Item No. 28 of the First
Schedule to the Industries (Development and Regulation) Act, 1951 for the
assessment year 1967- 68?" With a view to encourage export of industrial
goods, the Finance Acts of 1966 and 1967 provided an additional incentive. A
person engaged in the manufacture of any articles in an industry specified in
the First Schedule to the Industries (Development and Regulation) Act, 1951
[I.D.R. Act] and who was exported such articles out of India or has sold the
said articles to an exporter was entitled, to an additional deduction specified
in sub-clause (ii) and (iii) of clause (a) of Section 2(5) of the Finance Act,
1966 and Section 2(4) of the Finance Act, 1967. The relevant provisions in both
the Finance Acts are identical. It would suffice if we refer to the provisions
in the Finance Act, 1966. Insofar as relevant, the provisions in Section 2(5)
read as follows:

"2(5)(a)
In respect of any assessment for the assessment year commencing on the Ist day
of April 1966, in the case of an assessee being a domestic company or an assessee
other than a company, -- (i) where his total income includes any profits and
gains derived from the export of any goods or merchandise out of India, he
shall be entitled to a deduction, from the amount of income-tax with which he
is chargeable, of an amount equal to the income-tax calculated at one-tenth of
the average rate of income-tax on the amount of such profits and gains included
in his total income.

(ii)
where he is engaged in the manufacture of any articles in an industry specified
in the First Schedule to the Industries (Development and Regulation) Act, 1951
(LXV of 1951), and has, during the previous year, exported such articles out of
India, he shall be entitled, in addition to the deduction of income-tax
referred to in sub-clause (i), to a further deduction, from the amount of
income-tax with which he is chargeable for the assessment year, of an amount
equal to the income- tax calculated at the average rate of income-tax on an
amount equal to two per cent, of the sale proceeds receivable by him in respect
of such export;

Explanation
-- xxxxxxxx (iii) Where he is engaged in the manufacture of any articles in an
industry specified in the said First Schedule and has, during the previous
year, sold such articles to any other person in India who himself has exported
them out of India, and evidence is produced before the Income-tax Officer of
such articles having been so exported the assessee shall be entitled to a
deduction, from the amount of income-tax with c he is chargeable for the
assessment year of an amount equal to the income- tax calculated at the average
rate of income-tax on a sum equal to two percent of the sale proceeds
receivable by him in respect of such articles from the exporter.

(4) textiles
(including those dyed, printed or otherwise proceeded made wholly or in part of
jute, including jute twine and rope,

(5) newsprint,

(6)
pulp-wood pulp, mechanical, chemical including dissolving pulp,

(7) sugar,

(8) vegetable
oils and vanaspati,

(9) cement
and gypsum products,

(10) arms
and ammunition, and

(11)
cigarettes respectively, specified in items 2,18,20,23(2),24(2),24(5),25,28,35,
37 and 38 of the first Schedule to the industries (Development and Regulation)
Act, 1951 (LXV of 1951)." The appellant-assessee is a registered
partnership firm engaged in the manufacture of groundnut oil at Verval. It has
a solvent extraction plant at Veraval. It has a solvent extraction plant et Veraval.
It exported, to sold to exporters, de-oiled rakes of the value of Rs.
48,92,902/- and Rs. 24,13,040/- respectively during the accounting years
relevant to the Assessment Years 1966-67 and 1967-68 and claimed the additional
deduction in respect of the said amounts under the provisions of Section
2(5)(a)(ii) and (iii) of the Finance Act, 1966 and under Section 2(4)(a)(ii)
and (iii) of the Finance Act, 1967. The Income Tax Officer rejected the claim
with reference to and relying upon clause (c) of Section 2(5) of the Finance
Act, 1966 and clause (c) of Section (4) of the Finance Act, 1967. On appeal,
the Appellant Assistant Commissioner agreed with the assessee's contention that
clause (c) aforesaid refers to articles as such and not to industries and since
de-oiled cake is not mentioned in clause (c), the assessee is entitled to
additional deduction. The Tribunal affirmed the said view in appeal. At the
instance of the Revenue, the Tribunal referred the aforesaid two question under
Section 256(1).

The
only question that arises in these appeals is whether clause (c)) refers to
articles mentioned therein or whether it refers to industries engaged in the
manufacture of those articles. For answering this question, we have to turn to
the scheme underlying the provisions aforementioned.

Sub-clauses
(ii) and (iii), which provide the additional deduction, speak of the articles
manufactured in "an industry specified in the First Schedule to the I.D.R.
Act", which have been exported out of India by the manufacture during the
relevant accounting year or which have been sold to an exporter who has
actually exported them out of India.

Clause
(c) of Section 2(5) of the 1966 Act for Section 2(4) of the 1966 Act for
Section 2(4) of the 1967 Act] is in the nature of an exception to sub-clause
(ii) and (iii) of clause (c). If follows, as it must, the same pattern. Clause
(c) opens with the words "(N)othing contained in sub-clause (ii) or sub-clause
(iii) of clause (a) shall apply in relation to--". The it proceeds to
mention several articles, at the same time specifying the item numbers in the
First Schedule to the I.D.R. Act under which the said articles fall. Just as
the First Schedule [to the I.D.R. Act] mentions several articles under various
heads, so does clause (c) of Section 2(5) of the Finance Act, 1966 and Section
2(4) of the Finance Act, 1967. The description is identical in both the First
Schedule and clause (c). We may illustrate what we say. The pattern in the
First Schedule is to mention an article under a heading [item] and then mention
several categories thereof under the sub-headings [sub-items]. For example,
Item (2) in the First Schedule reads:

(3)
Fuel gases -- (coal gas, natural gas and the like)." Now, clause (c)
adheres to the said pattern, Where it seeks to refer to the entire item in the
First Schedule, it does so and where it seeks to refer only to a particular
sub-item in the First Schedule, it does so and where it seek to refer only to a
particular sub -item of an item in the first Schedule it says so - and the
description is identical. To writ, Item (1) in clause (c) is "Fuels",
the same as the heading of Item (2) of the First Schedule. item (2) in clause
(c) is "Fertilizers, the same as in Item (18) of the First Schedule.
Similarly, Item (3) in clause (c) is "photographic raw film and
paper", the same as Item (20) in the First Schedule. However, when it
comes to Item (4) in clause (c)), it covers only a sub-item of Item (23) in the
First Schedule. Item (23) of the First Schedule ":Textiles [including
those dyed, printed or otherwise processed]" has five sub-items, it reads:

"23.
TEXTILES (INCLUDING THOSE DYED, PRINTED OR OTHERWISE PROCESSED):

(1) Made
wholly or in part of cotton, including cotton yarn, hosiery and rope.

(2) Made
wholly or in part of jute, including jute twine and rope.

(3)
Made wholly or in part of wool, including wool tops, woollen yarn, hosiery,
carpets and druggets.

(4)
Made wholly or in part of silk, including silk yard and hosiery.

(5)
Made wholly or in part of synthetic, artificial (man-made) fibres, including
yarn and hosiery of such fibres." Item (4) in clause (c), however, refers
only to sub- item (2) of Item (23) in the First Schedule but not to other
sub-items. Item (4) in clause (c) reads: "Textiles (including those dyed,
printed or otherwise processed) made wholly or in part of jute including jute
twine and rope." Similarly, item (5) in clause (c) refers to sub-item (2)
of Item (24) of the First Schedule and Item (6) in clause (c) refers to
sub-item (5) of Item (24). In all cases, however, the description of articles
is identical. To repeat, both clauses (ii) and (iii) of clause (a) and clause
(c) refer to articles is identical. To repeat, both clauses (ii) and (iii) of
clause (a) and clause (c) refer to articles only, as does the First Schedule to
the I.D.R. Act. If so, all of them must carry the same meaning and purport.
Moreover, clause (c) being an exception to sub-clause (ii) and (iii) must follow
the same pattern as in the said sub-clauses. It is reasonable to presume so.

For
the above reasons, we agree with the High Court and dismiss the appeals. No
costs.